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1898rr02 03 PDF
1898rr02 03 PDF
DEPARTMENT OF FINANCE
BUREAU OF INTERNAL REVENUE
Quezon City
SEC. 2. RATES OF ESTATE TAX. - The transfer of the net estate of every
decedent, whether resident or non-resident of the Philippines, as determined in
accordance with the Code, shall be subject to the estate tax. The entire value of the net
estate is divided into brackets and each rate is imposed on the corresponding bracket.
Below is a table showing the tax on each bracket and the cumulative total tax for the
entire net estate, pursuant to the rates provided in the Code.
- P 200,000 Exempt - -
P 200,000 500,000 0 5% P 200,000
500,000 2,000,000 P 15,000 8% 500,000
2,000,000 5,000,000 135,000 11% 2,000,000
5,000,000 10,000,000 465,000 15% 5,000,000
10,000,000 and over 1,215,000 20% 10,000,000
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SEC. 3. THE LAW THAT GOVERNS THE IMPOSITION OF ESTATE
TAX. It is a well-settled rule that estate taxation is governed by the statute in force at
the time of death of the decedent. The estate tax accrues as of the death of the decedent
and the accrual of the tax is distinct from the obligation to pay the same. Upon the death
of the decedent, succession takes place and the right of the State to tax the privilege to
transmit the estate vests instantly upon death.
The application of the rates herein prescribed and the procedures in determining
the estate tax due shall apply to estate taxes falling due or have accrued beginning
January 1, 1998, the effectivity date of Republic Act No. 8424, otherwise known as
The Tax Reform Act of 1997.
If the property is a real property, the fair market value shall be the fair market
value as determined by the Commissioner or the fair market value as shown in the
schedule of values fixed by the provincial and city assessors, whichever is higher. For
purposes of prescribing real property values, the Commissioner is authorized to divide
the Philippines into different zones or areas and shall, upon consultation with competent
appraisers, both from the private and public sectors, determine the fair market value of
real properties located in each zone or area.
In the case of shares of stocks, the fair market value shall depend on whether the
shares are listed or unlisted in the stock exchanges. Unlisted common shares are valued
based on their book value while unlisted preferred shares are valued at par value. In
determining the book value of common shares, appraisal surplus shall not be considered
as well as the value assigned to preferred shares, if there are any.
For shares which are listed in the stock exchanges, the fair market value shall be
the arithmetic mean between the highest and lowest quotation at a date nearest the date of
death, if none is available on the date of death itself.
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To determine the value of the right to usufruct, use or habitation, as well as that of
annuity, there shall be taken into account the probable life of the beneficiary in
accordance with the latest basic standard mortality table, to be approved by the Secretary
of Finance, upon recommendation of the Insurance Commissioner.
The term "FUNERAL EXPENSES " is not confined to its ordinary or usual
meaning. They include:
Expenses incurred after the interment, such as for prayers, masses, entertainment,
or the like are not deductible. Any portion of the funeral and burial expenses borne or
defrayed by relatives and friends of the deceased are not deductible.
Medical expenses as of the last illness will not form part of funeral expenses but
should be claimed under subsection (F) of this section.
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Actual funeral expenses shall mean those which are actually incurred in
connection with the interment or burial of the deceased. The expenses must be duly
supported by receipts or invoices or other evidence to show that they were actually
incurred.
(a) If five percent (5%) of the gross estate is P70,000 and the amount
actually incurred is P50,000, only P50,000 will be allowed as
deduction;
(b) If the expenses actually incurred amount to P90,000 and five
percent (5%) of the gross estate is P70,000, only P70,000 will be
allowed as deduction;.
(c) If five percent (5%) of the gross estate is P220,000 and the amount
actually incurred is P215,000, the maximum amount that may be
deducted is only P200,000;
(d) If five percent (5%) of the gross estate is P 100,000 and the
total amount incurred is P150,000 where P20,000 thereof
is still unpaid, the only amount that can be claimed as
deduction for funeral expenses is P100,000. The entire
P50,000 excess amount consisting of P30,000 paid amount
and P20,000 unpaid amount can no longer be claimed as
FUNERAL EXPENSES. Neither can the P20,000 unpaid
portion be deducted from the gross estate as CLAIMS
AGAINST THE ESTATE under Subsection (C) hereof.
Any unpaid amount for the aforementioned cost and expenses claimed under
Judicial Expenses should be supported by a sworn statement of account issued and
signed by the creditor.
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(3) Claims against the estate. The word claims is generally construed
to mean debts or demands of a pecuniary nature which could have been enforced
against the deceased in his lifetime and could have been reduced to simple money
judgements. Claims against the estate or indebtedness in respect of property may arise
out of : (1) Contract; (2) Tort; or (3) Operation of Law.
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by any of the general partners. In case the creditor is
a bank or other financial institutions, the Certification
shall be executed by the branch manager of the
bank/financial institution which monitors and
manages the loan of the decedent-debtor. If the
creditor is an individual, the sworn certification
should be signed by him. In any of these cases, the
one who should certify must not be a relative of the
borrower within the fourth civil degree, either by
consanguinity or affinity, except when the
requirement below is complied with.
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(b) If the unpaid obligation arose from purchase of goods or
services:
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(c) Where the settlement is made through the Court in a testate
or intestate proceeding, pertinent documents filed with the
Court evidencing the claims against the estate, and the Court
Order approving the said claims, if already issued, in
addition to the documents mentioned in the preceding
paragraphs.
(4) Claims of the deceased against insolvent persons where the value
of the decedents interest therein is included in the value of the gross estate;
and,
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OF THE DECEDENTS INTEREST THEREIN, should always form part of
the gross taxable estate.
(D) The family home - An amount equivalent to the current fair market value
of the decedents family home: Provided, however, That if the said current fair market
value exceeds One million pesos (P1,000,000), the excess shall be subject to estate tax.
As a sine qua non condition for the exemption or deduction, said family home must have
been the decedents family home as certified by the barangay captain of the locality.
a) Definition of terms-
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Unmarried Head of a Family An unmarried or legally
separated man or woman with one or both parents, or with one or
more brothers or sisters, or with one or more legitimate, recognized
natural or legally adopted children living with and dependent upon
him or her for their chief support, where such brothers or sisters or
children are not more than twenty one (21) years of age, unmarried
and not gainfully employed or where such children, brothers or
sisters, regardless of age are incapable of self-support because of
mental or physical defect, or any of the beneficiaries mentioned in
Article 154 of the Family Code who is living in the family home
and dependent upon the head of the family for legal support.
(F) Medical expenses. - All medical expenses (cost of medicines, hospital bills,
doctors fees, etc.) incurred (whether paid or unpaid) within one (1) year before the
death of the decedent shall be allowed as a deduction provided that the same are duly
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substantiated with official receipts for services rendered by the decedents attending
physicians, invoices, statements of account duly certified by the hospital, and such other
documents in support thereof and provided, further, that the total amount thereof,
whether paid or unpaid, does not exceed Five Hundred Thousand Pesos (P500,000).
Any amount of medical expenses incurred within one year from death in excess
of Five Hundred Thousand Pesos (P500,000) shall no longer be allowed as a deduction
under this subsection. Neither can any unpaid amount thereof in excess of the P500,000
threshold nor any unpaid amount for medical expenses incurred prior to the one-year
period from date of death be allowed to be deducted from the gross estate as claim
against the estate.
(G) Amount received by heirs under Republic Act No. 4917. - Any amount
received by the heirs from the decedents employer as a consequence of the death of the
decedent-employee in accordance with Republic Act No. 4917 is allowed as a deduction
provided that the amount of the separation benefit is included as part of the gross estate
of the decedent.
(1) Expenses, losses, indebtedness, and taxes That proportion of the total
expenses, losses, indebtedness, and taxes which the value of such part bears to the
value of his entire gross estate wherever situated. The allowable deduction under
this subsection shall be computed using the following formula:
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Phil. Gross Estate X Expenses, Losses, = Allowable Deduction
World Gross Estate Indebtedness and Taxes
Illustrations :
Less: Deductions
Ordinary Deductions
Funeral Expenses P 200,000
Other Deductions 1,300,000 P 1,500,000
Special Deductions
Family Home P 1,000,000
Standard Deduction 1,000,000
Medical Expenses* 500,000 2,500,000
Total Deductions P 4,000,000
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Note : * Medical expenses are not included in the deductions referred
under Section 86(A)(1) of the Code but are treated as a special item of
deduction under Section 86(A)(6) of the same Code.
Special Deductions
Family Home P 800,000
Standard Deduction 1,000,000
Medical Expenses 500,000 2,300,000
Total Deductions P 3,800,000
Net Taxable Estate P 2,000,000
==========
Note: Deduction for family home is allowed for P800,000 only which is
the declared value of the family home.
Exclusive Properties:
Family Home P 2,000,000
Other Exclusive properties 2,500,000 4,500,000
-------------- --------------- ---------------
Gross Estate P 4,500,000 P 5,000,000 P 9,500,000
Less:
Ordinary Deductions
Conjugal Deductions
Funeral Expenses (P 200,000) ( 200,000)
Other Deductions ( 1,300,000) ( 1,300,000)
----------------- ---------------
Total Conjugal Deductions (P 1,500,000) (P1,500,000)
Net Conjugal Estate P 3,500,000
Special Deductions
Family Home (1,000,000)
Standard Deduction (1,000,000)
Medical Expenses ( 500,000)
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Total Deductions (P4,000,000)
Net Estate P 5,500,000
Less : Share of Surviving Spouse
Conjugal Property P5,000,000
Conjugal Deduction (1,500,000)
Net Conjugal Estate P3,500,000
(P3,500,000 /2) (1,750,000)
Net Taxable Estate P 3,750,000
Less: Deductions:
Ordinary Deductions
Conjugal Deductions
Funeral Expenses (P 200,000) ( 200,000)
Other Deductions ( 1,300,000) ( 1,300,000)
---------------- ---------------
Total Conjugal Deductions (P 1,500,000) (P1,500,000)
Net Conjugal Estate P 5,500,000
Special Deductions
Family Home ( 1,000,000)
Standard Deduction ( 1,000,000)
Medical Expenses ( 500,000)
Total Deductions (P4,000,000)
Net Estate P5,000,000
(c) Same facts and figures as in (b) except that the family home has a
fair market value/zonal value of only P1,500,000.
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Less:
Ordinary Deductions
Conjugal Deductions
Funeral Expenses (P 200,000) ( 200,000)
Other Deductions ( 1,300,000) ( 1,300,000)
---------------- ---------------
Total Conjugal Deductions (P 1,500,000) ( P1,500,000)
Net Conjugal Estate P 5,000,000
Special Deductions
Family Home ( 750,000)
Standard Deduction (1,000,000)
Medical Expenses ( 500,000)
Total Deductions (P3,750,000)
Net Estate P4,750,000
Less : Share of Surviving Spouse
Conjugal Property P6,500,000
Conjugal Deduction ( 1,500,000)
Net Conjugal Estate P 5,000,000
(P5,000,000 /2) ( 2,500,000)
Net Taxable Estate P 2,250,000
Note: Since the fair market value/zonal value of the conjugal family
home in the above example is P1,500,000, the family home deduction
corresponding to of such fair market value/zonal value is P750,000 only.
Exclusive Properties
Other Real Properties P2,000,000 2,000,000
Family lot 400,000 400,000
------------- ------------ -------------
Gross Estate P2,400,000 P4,000,000 P6,400,000
Less:
Ordinary Deductions
Conjugal Deductions
Funeral Expenses (P 200,000) ( 200,000)
Other Deductions ( 1,300,000) (1,300,000)
----------------- --------------
Total Conjugal Deductions (P 1,500,000) (P1,500,000)
Net Conjugal Estate P 2,500,000
Special Deductions
Family Home
Exclusive Lot P400,000
Conjugal Home
(P1,000,000/2) 500,000 ( 900,000)
Standard Deduction (1,000,000)
Medical Expenses ( 500,000)
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Total Deductions (P3,900,000)
Net Estate P2,500,000
Less : Share of Surviving Spouse
Conjugal Property P4,000,000
Conjugal Deduction (1,500,000)
Net Conjugal Estate P 2,500,000
(P2,500,000 /2) (1,250,000)
Net Taxable Estate P1,250,000
(A) Time for filing estate tax return. For purposes of determining the estate
tax, the estate tax return shall be filed within six (6) months from the decedents death.
The Court approving the project of partition shall furnish the Commissioner with a
certified copy thereof and its order within thirty (30) days after promulgation of such
order.
(B) Extension of time to file estate tax return. - The Commissioner or any
Revenue Officer authorized by him pursuant to the Code shall have authority to grant, in
meritorious cases, a reasonable extension, not exceeding thirty (30) days, for filing the
return. The application for the extension of time to file the estate tax return must be filed
with the Revenue District Office (RDO) where the estate is required to secure its
Taxpayer Identification Number (TIN) and file the tax returns of the estate, which RDO,
likewise, has jurisdiction over the donors tax return required to be filed by any party as a
result of the distribution of the assets and liabilities of the decedent.
(C) Place of filing the return and payment of the tax. In case of a resident
decedent, the administrator or executor shall register the estate of the decedent and
secure a new TIN therefor from the Revenue District Office where the decedent was
domiciled at the time of his death and shall file the estate tax return and pay the
corresponding estate tax with the Accredited Agent Bank (AAB), Revenue District
Officer, Collection Officer or duly authorized Treasurer of the city or municipality
where the decedent was domiciled at the time of his death, whichever is applicable,
following prevailing collection rules and procedures.
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The foregoing provisions notwithstanding, the Commissioner of Internal Revenue
may continue to exercise his power to allow a different venue/place in the filing of tax
returns.
(D) Time for payment of the estate tax. As a general rule, the estate tax
imposed under the Code shall be paid at the time the return is filed by the executor,
administrator or the heirs.
(E) Extension of time to pay estate tax. When the Commissioner finds that
the payment of the estate tax or of any part thereof would impose undue hardship upon
the estate or any of the heirs, he may extend the time for payment of such tax or any part
thereof not to exceed five (5) years in case the estate is settled through the courts, or two
(2) years in case the estate is settled extrajudicially. In such case, the amount in respect
of which the extension is granted shall be paid on or before the date of the expiration of
the period of the extension, and the running of the statute of limitations for deficiency
assessment shall be suspended for the period of any such extension.
For purposes of these Regulations, the application for extension of time to file the
return and extension of time to pay estate tax shall be filed with the Revenue District
Officer (RDO) where the estate is required to secure its TIN and file the estate tax return.
This application shall be approved by the Commissioner or his duly authorized
representative.
Any amount paid after the statutory due date of the tax, but within the extension
period, shall be subject to interest but not to surcharge.
(F) Payment of the estate tax by installment. In case the available cash of the
estate is not sufficient to pay its total estate tax liability, the estate may be allowed to pay
the tax by installment and a clearance shall be released only with respect to the property
the corresponding/computed tax on which has been paid. There shall, therefore, be as
many clearances (Certificates Authorizing Registration) as there are as many properties
released because they have been paid for by the installment payments of the estate tax.
The computation of the estate tax, however, shall always be on the cumulative amount of
the net taxable estate. Any amount paid after the statutory due date of the tax shall be
imposed the corresponding applicable penalty thereto. However, if the payment of the tax
after the due date is approved by the Commissioner or his duly authorized representative,
the imposable penalty thereon shall only be the interest. Nothing in this paragraph,
however, prevents the Commissioner from executing enforcement action against the
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estate after the due date of the estate tax provided that all the applicable laws and required
procedures are followed/observed.
(G) Liability for payment The estate tax imposed under the Code shall be paid
by the executor or administrator before the delivery of the distributive share in the
inheritance to any heir or beneficiary. Where there are two or more executors or
administrators, all of them are severally liable for the payment of the tax. The estate tax
clearance issued by the Commissioner or the Revenue District Officer (RDO) having
jurisdiction over the estate, will serve as the authority to distribute the
remaining/distributable properties/share in the inheritance to the heir or beneficiary.
The executor or administrator of an estate has the primary obligation to pay the
estate tax but the heir or beneficiary has subsidiary liability for the payment of that
portion of the estate which his distributive share bears to the value of the total net estate.
The extent of his liability, however, shall in no case exceed the value of his share in the
inheritance.
SEC. 10. RATES OF DONORS TAX. (A) Schedular rates of donors tax
imposable on donation made to a donee who is not a stranger. The transfer of the
total net gifts made during the calendar year shall be subject to tax in accordance with the
schedule provided in Section 99 of the Code. The entire value of the net gifts for each
calendar year is divided into brackets and each rate is imposed on the corresponding
brackets as shown below:
- P100,000 Exempt
P100,000 200,000 0 2% P 100,000
200,000 500,000 2,000 4% 200,000
500,000 1,000,000 14,000 6% 500,000
1,000,000 3,000,000 44,000 8% 1,000,000
3,000,000 5,000,000 204,000 10% 3,000,000
5,000,000 10,000,000 404,000 12% 5,000,000
10,000,000 1,004,000 15% 10,000,000
(B) Tax payable by the donor if donee is a stranger. - When the donee or
beneficiary is a stranger, the tax payable by the donor shall be thirty per cent (30%) of
the net gifts. For purposes of the donor's tax, a "stranger" is a person who is not a:
(2) Relative by consanguinity in the collateral line within the fourth degree of
relationship.
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A legally adopted child is entitled to all the rights and obligations provided
by law to legitimate children, and therefore, donation to him shall not be considered
as donation made to stranger.
Where property, other than a real property that has been subjected to the final
capital gains tax, is transferred for less than an adequate and full consideration in money
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or moneys worth, then the amount by which the fair market value of the property at the
time of the execution of the Contract to Sell or execution of the Deed of Sale which is
not preceded by a Contract to Sell exceeded the value of the agreed or actual
consideration or selling price shall be deemed a gift, and shall be included in computing
the amount of gifts made during the calendar year.
The law in force at the time of the completion of the donation shall govern the
imposition of donors tax.
For purposes of the donors tax, NET GIFT shall mean the net economic benefit
from the transfer that accrues to the donee. Accordingly, if a mortgaged property is
transferred as a gift, but imposing upon the donee the obligation to pay the mortgage
liability, then the net gift is measured by deducting from the fair market value of the
property the amount of mortgage assumed.
Illustration:
Donations made on:
January 30, 2002 -- P 2,000,000
March 30, 2002 -- 1,000,000
August 15, 2002 -- 500,000
Solution/computation:
Date of donation Amount Donors Tax
1. January 30, 2002 P 2,000,000 P 124,000
2. March 30, 2002 1,000,000
March 30, 2002 donation 1,000,000
Add: January 30, 2002 donation 2,000,000
Total 3,000,000
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3. August 15,2002 500,000
(1) Each gift made during the calendar year which is to be included in
computing net gifts;
(3) Any previous net gifts made during the same calendar year;
(B) Time and place of filing and payment. The donors tax return shall be
filed within thirty (30) days after the date the gift is made or completed and the tax due
thereon shall be paid at the same time that the return is filed. Unless the Commissioner
otherwise permits, the return shall be filed and the tax paid to an authorized agent bank,
the Revenue District Officer, Revenue Collection Officer or duly authorized Treasurer of
the city or municipality where the donor was domiciled at the time of the transfer, or if
there be no legal residence in the Philippines, with the Office of the Commissioner. In
the case of gifts made by a non-resident, the return may be filed with the Philippine
Embassy or Consulate in the country where he is domiciled at the time of the transfer, or
directly with the Office of the Commissioner. For this purpose, the term OFFICE OF
THE COMMISSIONER shall refer to the Revenue District Office (RDO) having
jurisdiction over the BIR-National Office Building which houses the Office of the
Commissioner, or presently, to the Revenue District Office No. 39 South Quezon City.
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(PCNC), the donor engaged in business shall give a notice of donation on every
donation worth at least Fifty Thousand Pesos (P50,000) to the Revenue District Office
(RDO) which has jurisdiction over his place of business within thirty (30) days after
receipt of the qualified donee institutions duly issued Certificate of Donation, which
shall be attached to the said Notice of Donation, stating that not more than thirty
percent (30%) of the said donation/gifts for the taxable year shall be used by such
accredited non-stock, non-profit corporation/NGO institution (qualified-donee
institution) for administration purposes pursuant to the provisions of Section 101(A)(3)
and (B)(2) of the Code.
(Original Signed)
JOSE ISIDRO N. CAMACHO
Secretary of Finance
Recommending Approval :
(Original Signed)
GUILLERMO L. PARAYNO, JR.
Commissioner of Internal Revenue
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